5/16/2024 - Economy and Finance

meme-coins: Bubble or new opportunity in the financial market?

By Rodrigo Coronel

meme-coins: Bubble or new opportunity in the financial market?

a memecoin ai art for this article

For those who still don't know, memes are now digital assets that can be bought and sold just like any other financial asset.

Exactly two years ago I was teaching fintech classes to university students, graduate students, as well as closed groups in financial companies, and at that time we were living what was called the crypto winter, given by the fall of cryptocurrency values waiting for a new rise. Today we are experiencing what is called a new rush of decentralized cryptocurrency fintech markets and it is remarkable not only the rise in their prices but also the volume of operations they have, but I want to be clear, 2 years ago I discouraged investing in cryptocurrencies and today my vision has not changed. My risk appetite makes me define my portfolio with the smallest possible proportion to this type of assets. But on the other hand, I am not and do not define the market and even less the crypto market. It is also important to understand the behavior of this decentralized market and although many try to use everything from technical analysis to AI, it is really a much more volatile market and without so many micro-economic fundamentals.

A booming market.

For those who still do not know about this world there are what are called centralized cryptocurrency markets that allow the purchase and sale of crypto by making what is called a knowledge of the customer or KYC, but there are also decentralized markets, which are those digital platforms in which you can buy and sell any asset whether cryptocurrency or a token in any blockchain through them and these do not need a recognition of who is really the operator who buys or sells.To such digital assets more than 3 years ago were added NFTs with very rudimentary arts that were sold in generally within collections and in some cases constituted access to a community, in others they were simply artwork and in others just doodles. These are sold on customized platforms such as OpenSea or Rarible and today this market amounts to $68.67 billion.

These markets replicate what is done in the capital markets when a new one goes on sale. The asset launches called IPOs or initial public offering launches, and in the crypto markets called in different ways ICOs, STOs, UTOs, among others, and extending to the decentralized markets IDOs, DEX, token launch, pre-sale and token sale. Basically they represent the creation and sale of a new asset. Add to these tokens NFTs and meme-coins and you get a salad of assets that are not regulated by governmental or supervisory bodies. They have no intrinsic value beyond that provided by a community that buys them and operates through social networks and messaging communication platforms such as Telegram, X or their information residing on a website. It has no economic production behind it like a company stock, no fundamental analysis can be made of its books or its projections. They are just decentralized assets with a community behind them.

Meme coins: the new market fever.

There are many versions of what is the real Market Cap of meme-coins, today at MoinMarketCap at the time I am writing, the capitalization of the top Meme Tokens amounts to $47 billion dollars. Among these you will surely recognize some of them as it has sounded the social networks dogecoin, shiba inu, pepe, dogs with hats, floki, among others.

These meme-coins are tokens like digital currencies, they have a market capitalization, a buying and selling price, a list of buyers and a list of sellers, and have a coin economy, so they are subject to inflation and deflation based on the demand and supply that represents the amount of coins in circulation. Technologically, although they can be created in different blockchain networks, the ones that have stood out the most are Avalanche and Solana. and focusing on the latter, I have recently come across a platform that allows launching new tokens, pump.fun. A platform somewhat removed from the traditional capital markets more like a game than a decentralized investment platform, but seeing it work seems exactly like watching the movement of any other trading platform in which you see sales and purchases at the speed of light. Something that struck me watching this platform to work and the assets that are traded on it is the appetite for return and risk that the players in this market possess, it was like seeing people in a casino with an appetite and appetite to make a lot of money in a short time.

Clearly these are unregulated markets and therefore the assets that are created and traded in them do not have to be controlled or supervised by any entity that oversees both their value and their operations. For the reader to understand it in a more digestible concept, if there is an error, scam, price alteration, manipulation of the asset, you can not go to anyone to complain.

Bubble or new opportunity?

Going back to the beginning of the story where I was teaching classes on fintech and about that also on cryptocurrencies, blockchain and where I was warning my students to be more aware regarding the risk of such assets, I also remember having previously warned about both the mortgage crisis of 2008 and the digital asset or crypto crisis in 2019. It is true that the regulated capital markets also had their crises mainly due to lack of controls, the appetite for high return instruments that also validated a lot of risk, but the volatility of the cryptoasset markets added to the volatility of the digital decentralized markets and even more the launch of new tokens based on memes, has led me to evaluate in a preliminary way if we are facing a new bubble, and it is possible that we are. But the most remarkable thing was to find the ability of some traders to make early profits on these launches and make other investors lose small sums of cryptocurrency money so that instead of a bubble bursting and exploding an entire economy, they are micro interactions with micro-losses so that it may go unnoticed by the financial and investment markets and remain the casino where gamblers gamble their savings to become millionaires.

Conclusion.

Meme coins are a new and complex financial phenomenon. While there are risks associated with it, there are also opportunities for those who understand how it works. As the Chinese proverb says, "where there is a risk there is an opportunity". The key is to learn how they work and use that knowledge to generate value in the real economy.

Sources:

https://www.forbes.com/digital-assets/nft-prices/?sh=4d6f73d56dfb

https://coinmarketcap.com/view/memes/

https://www.pump.fun/board

https://www.advfn.com/monitor

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rodrigo coronel

Rodrigo Coronel

With a career spanning over 21 years, I have assumed diverse roles as finance executive, sales manager, Product Owner, Scrum Master and PM, specializing in IT/Business transformation. I have led teams locally and globally, incorporating methodologies such as Lean, Design Thinking, Agile, waterfall, and exploring emerging technologies in Machine Learning, Artificial Intelligence, LLM, web3 and the metaverse.

As CFO at RoloStudios LLC, I drove transformational changes in finance, collaborated on strategic initiatives and optimized processes. Simultaneously, I contributed to academia as a Fintech Docent, sharing knowledge on blockchain and AI. My academic background in Management and Finance, along with certifications in Project Management, Agile Scrum and Blockchain, highlight my commitment to continuous learning.

Currently based in Cordoba, Argentina, I work remotely, balancing a full personal life as a husband and father of five children alongside my professional projects.

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